Mandatory audit rotation hinders competition and creates barriers for mid-tier firms with fees hitting £300,000 for tenders, says Robert Hannah, chief operating officer at Grant Thornton, as the firms pulls out of bidding for FTSE 350 audits in the future, reports Amy Austin
Grant Thornton has made the decision to move away from tendering for statutory audit work in the FTSE 350, citing the difficulty of taking on the Big Four’s dominance in this area.
Hannah told Accountancy Daily: ‘Grant Thornton has established a very strong credibility in the public sector audit market and it is also one of the largest firms in the AIM market, therefore the firm has demonstrated that it can do large organisation audits.
‘Since the introduction of mandatory rotation we have been pitching for a lot of FTSE 350 businesses but our success rate is so low that we have come to the conclusion that we are better off providing audit services to parts of the market that appreciate and acknowledge our capability.
‘Continuing to tender in that market does not make sense for us and until the market has a dynamic shift we will not be focusing our attention there.’
Hannah also said he would not be surprised if other mid-tier firms also leave the FTSE 350 audit market due to the high costs. It costs somewhere in the region of £300,000 to do complete a FTSE 350 tender.
‘Audit rotation is certainly not increasing choice or that increased not is not being used by those that are making the selections’, explains Hannah.
The Grant Thornton chief wants to see competition improved within the market as well as wider debate on a number of issues such as what exactly auditors are required to do when auditing various business sectors.
Hannha said: ‘The audit competition debate has got tangled with the conflict of interest debate which is something quite different altogether. Conflict of interest is a separate issue about whether the auditor has conflicts that do not emphasise independence but this as an issue is not related to what choice businesses have in the market.’
Grant Thornton will now focus its audit skills on the AIM market and mid-market businesses. ‘We are now focusing on where we are welcome and where we feel we can make a difference,’ says Hannah. ’However, we will still focus our advisory services on FTSE 350 and other parts of the market that we currently work with.’
Grant Thornton will continue to serve its existing FTSE 350 clients.
Further reading
Grant Thornton pulls out of bidding for FTSE 350 audits
Report by Amy Austin
